EDITORIAL: And it’s off — Arlington racino rejection another sign new gambling law is flawed

This is exactly the sort of thing that can happen when the state Legislature moves awfully darn fast on a big bill that has many moving parts.

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Arlington Park International Racecourse in 2007.

Sun-Times Library

On Wednesday, the owners of Arlington International Racecourse announced they won’t be setting up slot machines and casino games at the track, throwing the future of local horse racing up for grabs.

Running a “racino” at Arlington just wouldn’t be worth it, they say.

This might be bad news for the horse racing industry, which supports a lot of jobs. Arlington could be closed or moved.

And it’s bad for the state of Illinois, which was counting on tax revenue from an Arlington racino to help pay for big capital expenditures, such as new schools.

But nobody should be surprised. This is exactly the sort of thing that can happen when the state Legislature moves awfully darn fast on a big bill that has many moving parts.

This past spring, lawmakers approved a massive expansion of legal gambling, including the provision for a racino at Arlington. It all happened so fast that nobody had really done the studies or run the numbers to see if it all made sense.

Now they are running the numbers. And things aren’t adding up.

We are learning that new casinos proposed for the suburbs might never get built because the competition could be too great and the government’s take in taxes could be too high. We also are learning that a Chicago casino could be a bust unless located right downtown. And then there’s the news this week about Arlington.

It’s hard to suss out precisely what’s going on here. In the early 1990s, the owners of Arlington shut down the track for a year just to put the squeeze on the state for better terms on taxes and subsidies, and maybe we’re seeing a replay of that strategy now. You’d expect gambling industry executives to say they’re being taxed to the max. It’s their job to keep pushing for that little extra edge.

Regardless, during its annual fall veto session, the Legislature likely will be forced to take another crack at the gambling expansion law. Let’s hope it does a better job this time of delivering a deal that’s good for both business and the state.

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For years, Arlington had sought a racino to shore up the racetrack’s bottom line, so its ownership’s announcement that it is no longer interested in one surprised pretty much everybody, beginning with Gov. J.B. Pritzker.

The owner, Churchill Downs Inc., let a deadline pass for applying for newly authorized state gaming licenses, saying it would be tough, under the new law, to turn a sufficient profit on a racino. The company appears to be putting its chips instead on its newly acquired majority interest in the Rivers Casino in Des Plaines, for which a racino at Arlington — just 11 miles down the road — would be a competitor. The state’s gambling expansion bill authorizes Rivers Casino to expand by up to 800 more gaming positions.

But there may be more on the line this time. The Legislature is relying on racino revenues to help pay for schools, university buildings, water systems and other projects in a $45 billion capital bill. In all, the gambling expansion bill was expected to rake in $2.7 billion in one-time revenues and about $470 million a year after that.

The first red flag that the new gambling package might not be grounded in reality was waved a few weeks ago by a consultant for the Illinois Gaming Board, who concluded that a Chicago casino built on any of five proposed sites on the South or West sides would not be “feasible” because of an “onerous” tax structure.

“The whole idea [of the gaming bill] was to maximize revenues to the state,” one legislator told us. “Now, I am sure there are discussions about how do we solve this problem. … I am sure there is a feeling that Churchill Downs has double-crossed the state.” 

Churchill Downs says the gambling bill’s high taxes on Arlington and massive expansion of new gambling competition mean a new racino at Arlington would be “untenable” financially, rather than a lifeline. CEO Bill Carstanjen blames the requirement that part of casino earnings go to racing purses — something Arlington has, in fact, been clamoring to do for years.

But the Illinois Thoroughbred Horsemen’s Association says the company is betraying the lawmakers who did Arlington’s bidding by supporting a racino, as well as all the workers in the thoroughbred horse racing industry.

Laurence Msall, president of the Civic Federation, said flaws in the legislation should have been expected because the Legislature rushed through an extremely complicated last-minute bill without giving lawmakers or the public a chance to examine it in detail. The new law authorizes six new casinos and legalizes statewide sports betting for the first time.

“No one was standing up with any facts or figures saying how this is going to work,” Msall said. “It is an indictment of the Illinois process of not have having transparency before votes are taken.”

The Legislature may have to revamp the rates of taxation in the gambling bill — or at least hear out the complainers. And it will have to revise the timing of spending in the capital bill.

“I don’t think they anticipated the pushback from the industry,” Ralph Martire, executive director of the Center for Tax and Budget Accountability, said. “It surprises me the final package was so out of whack with what the industry would accept.”

Let’s get it in whack.

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SOURCE: Illinois Racing Board

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